Real Estate News
June 29, 2016
The draft Real Estate rules prepared by the Housing and Urban Poverty Alleviation Ministry has called for developers to compensate homebuyers by paying 11.2 per cent for delaying their projects. The move is expected to bring relief to homebuyers who have been affected by projects getting incessantly delayed in addition to rising loan burdens.
The draft rules have also asked for projects which have failed to procure completion certificates to be registered with Real Estate Regulatory Authority (RERA) which is expected to be set up in all the states and Union Territories (UTs) within three months once the rules are notified. Developers will be required to furnish information such as project completion dates, flats sizes, and amenities promised. The rules will seek suggestions from the public till July 8.
The rules were prepared by the Ministry within two months of the passing of Real Estate (Development and Regulation) Act 2016, on May 1 with 69 of 92 sections published.
The proposed interest rate compensation is two per cent above State Bank of India's (SBI) prime lending rate (PLR). A home loan in SBI can is available at 0.20-0.80 percentage points above the MCLR (marginal cost of fund-based lending rate), which now is 9.15 per cent which is the PLR for a retail loan. Currently, the home loans are available at 9.35-9.95 per cent interest rate, while the compensation interest rate will be 11.2 per cent.
Further, if there is any violation such as a delayed possession, an increase in apartments size, alternations in layout constructions of additional towers without taking approval from at least 70 per cent allottees will lead to the projects registration being canceled. Further, the Authority will be authorized to take any decision such as roping in an external agency to get the projects completed with buyers' association providing its consent.
The draft rules have also imposed a "compounding" fine which developers can pay to avoid being jailed for violating regulator rules. Meanwhile, the developer fraternity has expressed their displeasure at the move stating that it will impact the present ongoing projects which could further add to delay. Getamber Anand, President Confederation of Real Estate Developers' Associations (CREDAI) India, shared that there are many ongoing projects launched before 2012 which can be called as defaulters.
Since real estate in each state functions differently, the state government will be required to frame rules within a time period of six months from the date the Act was published, which is May 1. The rules have been termed as homebuyer-friendly as it forces the developers to finish all the projects on time.
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